Insurance is a social device to reduce or eliminate risk related to a person and property. One can be insured against fire, peril of sea, death, incident and burglary. It is a contract between two parties, Insurer and Insured.
Insurance law is the name given to practices of law surrounding insurance, including insurance policies and claims. Insurance law was brought into action to assure solvency of insurance company, capitalization, reserve policies, rates and various other ‘back office’ process.
In life insurance business India was ranked 9th among 156 countries in the year 2010-2011.
Insurance law in India was originated with the establishment of a British firm Oriental Life Insurance Company in 1818, Calcutta which was followed by Bombay life assurance company 1823, Madras equitable 1829… etc.
Until 1871 before the establishment of Bombay Mutual Life assurance Company other people were overcharged premiums by 20% compared to British nationals which provided the need for provision of statutory measures in business of insurance.
First statutory measure in India to regulate life assurance companies was established in 1912 with Indian Life Assurance Companies Act,1912.
General Insurance first originated in India with the establishment of Triton Insurance Company, 1850 by British nationals in Calcutta. First general insurance company by an Indian was Indian Mercantile Insurance Company in Bombay in the year 1907. With the growth of fire, accident, marine insurance, it felt a need to include such insurances under the purview of the Act of 1912. With number of attempts it was then successfully included in Insurance Act,1938.
In January 1956, Management of life insurance business in India was taken over by central government. Life Insurance Corporation (LIC) was established in September 1956 by the Life Insurance Act,1956 also called LIC Act 1956 which granted LIC the exclusive privilege to conduct life insurance business in India. General Insurances were nationalised in January 1973 through introduction of General Insurance Business (nationalisation) Act, 1972.
Since the nationalisation of LIC in the year 1956, LIC held a monopoly in life insurance business followed by nationalisation of GIC in the year 1973 and since then GIC held a monopoly in general insurance business. Both GIC and LIC played a significant role in development of insurance market in India.
The Indian Parliament passed the Insurance Regulatory and Development Act, 1999 (“IRD Act”) on December 2, 1999 with the aim “to provide for the establishment of an Authority, to protect the interests of the policy holders, to regulate, promote and ensure orderly growth of the insurance industry and to amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the General Insurance Business (Nationalization) Act, 1972”.
Types Of Insurance
Insurance business is divided into following types of business namely:
- Life Insurance
Life insurance is a contract that pledges payment of an amount to the person assured (or his nominee) on the happening of the event insured against. The contract is valid for payment of the insured amount during:
· The date of maturity, or
· Specified dates at periodic intervals, or
· Unfortunate death, if it occurs earlier.
- General Insurance
Insurance other than ‘Life Insurance’ falls under the category of General Insurance. General Insurance comprises of insurance of property against fire, burglary etc, personal insurance such as Accident and Health Insurance, and liability insurance which covers legal liabilities. There are also other covers such as Errors and Omissions insurance for professionals, credit insurance etc.
Types of General Insurance are:
a. Marine insurance
b. Fire insurance
c. Motor vehicle insurance
d. Miscellaneous insurance
Every insurer re-insures himself to protect against the risks to which it subjects himself in the conduct of insurance business
Some Important Regulatory Authorities for Insurance sector in India are as follows
- Insurance Regulatory and Development Authority
IRD act established the Insurance Regulatory and Development Authority as a statutory body to regulate, control and promote the business of insurances in India. It also provides protection to interests of insurance policy holders. In one of the series of amendments of the IRD act of 1938 the power of control of insurance industry was passed on to IRDA.
IRDA promotes, regulates and ensures the growth of insurance industry in India by providing effective schemes for the same. IRDA holds all the responsibilities of Insurance industry from solving disputes to deciding of premium percentages in urban as well as rural sectors.
- Tariff Advisory Committee
The Tariff Advisory Committee is a body corporate, which controls and regulates the rates, advantages, terms and conditions offered by insurers in the general insurance business. The Advisory Committee has the authority to require any insurer to supply such information or statements necessary for discharge of its functions.
Legislations regulating insurance sector in India
The Insurance sector in India is regulated by the following Acts:
- The Insurance Act, 1938
Insurance Act, 1938 is a law passed in 1938 in British India to regulate insurance companies and provide them a legal framework for smooth operation. The Insurance Act has 120 sections and 8 schedules. Under it, only an Indian company, as defined and registered under Companies Act, 1956, is allowed to operate in India
Life Insurance Corporation Act, 1956 provides regulations for the nationalisation of insurance industry in India, also it controls and regulates business of such corporations and matters related to or inclusive of such corporations.
- Marine Insurance Act, 1963
Marine Insurance provides security for loss and damages related to cargo, ships or any marine property. Marine Insurance Act, 1963 is regulatory statute for law specifically relating to Marine insurances.
- General Insurance Business (Nationalization) Act, 1972
General Insurance Business (Nationalization) Act, 1972 is an act to provide for the acquisition and transfer of shares of Indian insurance companies and undertakings of other existing insurers in order to serve better the needs of the economy by securing the development of general insurance business in the best interests of the community and to ensure that the operation of the economic system does not result in the concentration of wealth to the common detriment, for the regulation and control of such business and for matters connected therewith or incidental thereto.
- Insurance Regulatory and Development Authority (IRDA) Act, 1999
Insurance Regulatory and Development Authority (IRDA) Act, 1999 is an act to provide for the establishment of an Authority to protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto and further to amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the General Insurance Business (Nationalisation) Act, 1972.
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